Were America’s Assets Looted Years Ago?

Forbes’ Merrill Matthews argues that the multi-trillion dollar social security trust fund was looted years ago:

Either Obama and Geithner are lying to us now [in saying that social security checks won’t go out if the debt ceiling isn’t raised], or they and all defenders of the Social Security status quo have been lying to us for decades. It must be one or the other.

Here’s why: Social Security has a trust fund, and that trust fund is supposed to have $2.6 trillion in it, according to the Social Security trustees. If there are real assets in the trust fund, then Social Security can mail the checks, regardless of what Congress does about the debt limit.

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Social Security status-quo defenders have assured us for the past 25 years that Social Security is fully funded—for the next 25 years, or 2036. So if there are real assets in the Social Security Trust Fund—$2.6 trillion allegedly—then how could failure to reach a debt-ceiling agreement possibly threaten seniors’ Social Security checks?

The federal government has borrowed all of [social security] trust fund money and spent it … And the only way the trust fund can get some cash to pay Social Security benefits is if the federal government draws it from general revenues or borrows the money—which, of course, it can’t do because of the debt ceiling.

[T]he president is telling the truth now in the sense that he is conceding there’s no money in the trust fund to pay benefits; but he and other Social Security status-quo defenders have been deceiving the public for decades.

Indeed, as the following excerpt from the 1998 Senate Budget Committee session shows, Senator Hollings alleged that the government had already been “borrowing” from the social security fund:

GREENSPAN: Well, I remember you taking this song a long way over recent years, and I must say, Senator, a number of us were skeptical that was even discussable, figuring we would never get to unified surplus that we said which you were preaching was very interesting, scientifically sound, but unrealistic. I apologize.

HOLLINGS: Well that’s all right, because your Greenspan Commission report in section 21 says just exactly what you’re saying here. That was in 1983; here now, in 1999, on page two, “simply put, enough resources must be set aside over a lifetime of work to fund retirement consumption.” Now that section 21 said set it aside. President Bush, in section 13 3 01 on November the 5th, 1990 signed that into law. And we making headway. Let’s understand, though, that we’re still running deficits. ‘Cause I’m not going along with this monkeyshine about unified. ‘Cause unified is not net, the debt still goes up, is that correct?

GREENSPAN: If you’re…it depends on whether or not you wish to create the savings…

HOLLINGS: I’m not asking what you’re trying to create. The simple fact is the debt has been going up at least $100 billion for the last several years.

HOLLINGS: And this president’s budget spends another hundred billion more than we take in.

GREENSPAN: I haven’t seen it yet.

HOLLINGS: You haven’t seen it? You’re testifying about it now.

GREENSPAN: I haven’t seen the budget. You haven’t seen it either.

HOLLINGS: Well, you know his plan. Look you think he’s going to spend less than a hundred billion more?

GREENSPAN: I will wait to see what the numbers look like.

HOLLINGS: Well, the truth is…ah, shoot, well, we all know there’s Washington’s math problem. Alan Sloan in this past week’s Newsweek says he spends 150%. What we’ve been doing, Mr. Chairman, in all reality, is taken a hundred billion out of the Social Security Trust Fund, transferring it over to the spending column, and spending it. Our friends to the left here are getting their tax cuts, we getting our spending increases, and hollering surplus, surplus, and balanced budget, and balanced budget plans when we continue to spend a hundred billion more than we take in.

That’s the reality, and I think that you and I, working the same side of the street now, can have a little bit of success by bringing to everybody’s attention this is all intended surplus. In other words, when we passed the Greenspan Commission Report, the Greenspan Commission Report only had Social Security in 1983 a two hundred million surplus. It’s projected to have this year a 117 million surplus. I’ve got the schedule, I’ll ask to put in the record the CBO report: 117, 126, 130, 100, going right through to 2008 over the ten year period of 186 billion surplus. That was intended; this is dramatic about all these retirees, the baby boomers. But we foresaw that baby boomer problem, we planned against that baby boomer problem. Our problem is we’ve been spending that particular reserve, that set-aside that you testify to that is so necessary. That’s what I’m trying to get this government back to reality, if we can do that.

We owe Social Security 736 billion right this minute. If we saved 117 billion, we could pay that debt down, and have the wonderful effect on the capital markets and savings rate. Isn’t that correct? Thank you very much, Sir. Thank you, Mr. Chairman.